What I’ve learned as an entrepreneur
I’ve attempted several small business ventures throughout my life. I’ve learned a lot along the way, and thought I’d share some of my experiences.
When I was about 10 years old I got into the media distribution business. That is a fancy way of saying that I bought a box of floppies at Office Depot, downloaded the Anarchist Cookbook (and other e-texts), and sold them for a few dollars before and after school. I made (from a 10 year old’s perspective) a pile of money. I learned a lot from the experience:
- Pricing matters. If I charged $0.50, nobody would buy my disks. If I charged $2.00, everybody wanted them. A higher price gave an appearance of higher quality, which drove sales.
- Keep your trade secrets secret. I lost all my business by being too talkative about how I got a hold of the material I was selling. Everyone stopped buying from me and instead just downloaded for free from the internet.
When I was about 15 years old, I started a web hosting business. I had some exposure to ColdFusion (a web programming language that was once fairly popular). The difficulty with programming in ColdFusion was finding a host that supported it. I found one that charged $99/year, or you could get a reseller account that let you buy hosting at $50/year and resell at whatever price you wanted. With the approval of my parents I got a merchant account so I could process credit cards, signed a lease for expensive credit card processing software, and developed a website that would take online orders, process payments, and track revenue. I sold hosting accounts to classmates at a community college that I was attending, tried some online advertising, and made a little money. Ultimately, however, the business was a failure. I made too many mistakes and was too inexperienced for the business to thrive long term. I learned a lot though:
- Avoid badmouthing the competition. I made the mistake (repeatedly) of trying to gain business by badmouthing the competition. Unfortunately, this always backfired. The competition’s happy customers were always quick to the defense, and it just left me looking like a jerk.
- Avoid getting locked into long-term commitments. Just a few months after I signed the lease for my credit card processing software, affordable online gateways became readily available. I couldn’t switch without paying a huge fee to break my lease. This made the business more time intensive than it needed to be, and cost me a lot of money in unnecessary fees.
- Don’t spend your whole advertising budget at once. I spent my whole advertising budget in one go at a website that gives users a kickback when they purchase through a specific link. It was something like “buy hosting through this link and get $10 back”. It looked like I was guaranteed to make a pile of money. Unfortunately, the kickback company had a security flaw that let some of their dishonest users take all my advertising money without providing me a single sale. I was devastated, but learned to diversify my advertising efforts.
- Be prepared to change. When ColdFusion went out of style, my sales plummeted. If I had been looking ahead, I could have diversified my product offerings so I could retain repeat customers while appealing to a wider range of people.
- Automate, automate, automate. I wasted a lot of time manually doing tasks that I should have automated. This lowered my effective hourly wage and led to costly mistakes.
- Keep business and personal funds separate. I co-mingled my funds and it made it difficult to know how much I was actually making. Keeping business and personal funds separate would have made this a lot better.
About a year later, while I still had the web hosting business going, I started a content site focused on LDS media and articles. It was developed on a popular framework of the time, PHP-Nuke. I created modules for this framework that I gave out for free as an advertising tool that gained me piles of international traffic. Learning from previous experience, I automated as much as I could and used multiple methods of advertising. I “generously” offered to take over competitor’s sites that they were no longer interested in or able to maintain. I frequently reviewed how people were accessing my site so I could adapt to the future. This was the first time I started making money by selling advertising space and by using affiliate programs. I learned a lot from this experience, too:
- Make backups. I was running this site for several years and making a fair amount of money. I set it on auto-pilot when I left for my mission when I was 19 years old. A few months later, my hosting company went bankrupt and took my website with it. All my data, images, and code was gone. The most recent backup I had was so old I wasn’t able to get anything up and running while serving a full time mission. I lost my entire business in a single day.
- Don’t cheap out. My site was on a budget host that charged something like $99 for a lifetime hosting account. In hindsight it was inevitable that this host would fail, but I was blinded by the “savings”. I learned that it is often cheaper in the long run to pay a little more for a quality provider rather than settling for the lowest bidder.
- Share. My best traffic came from the free tools and content that I provided. Advertisers loved this traffic and paid me well for it. Visitors loved the content I provided. Webmasters loved the free tools they could put on their websites. It was a win for everybody.
- Design matters. Putting the effort into a good design made a huge impact on how people perceived my website and the value it provided. It is just like at the grocery: the store brand may be identical to the name brand, but most people pick the prettier packaging.
When I was 16 years old, I got a job working for KB Toys at my local outlet mall. I discovered that we sold all sorts of products that were hard to get or just crazy discounted. I was able to get complete sets of collectible action figures, discounted strobe lights, rare model cars, and other items that ended up making me more money on eBay (even after fees) than I was getting paid while on the clock. I learned:
- Always look for opportunities to make money. I could have been satisfied mopping floors and stocking shelves, but I kept my eyes open for an opportunity to earn more and I found one. I think almost everyone has opportunities to earn more money if they are a little creative and take the time to look for them.
- Let someone else pay for your education. When a customer came in looking for collectibles, I’d spend 10-15 minutes talking to them about what they were looking for, what made certain items valuable and certain items worthless, that sort of thing. I was essentially getting paid by KB Toys to learn what items I needed to find to resell, while getting pats on the back from management for keeping customers in the store longer. Later in life I used this same principle to learn new web technologies while on the clock. This earned me a paycheck while improving my resume and giving me new tools to build my business with.
- Keep good records. I lost a little money by keeping sloppy records of my shipments. I’d ship a product, and someone would complain saying I didn’t. Without tracking numbers or proof of shipment, I was out of luck.
- Be honest. I never used my employee discount when buying items for resale because that was against company policy. When a manager tried to stop me from buying for resale after I had already been doing it for months, he couldn’t because company records showed that I always followed company policy. It never pays in the long term to be dishonest.
When I was 18 years old I got a job in IT at a product packaging company. They had a huge warehouse filled with electronic junk that they occasionally paid to have hauled off. I was given permission to take anything I wanted from the junk bins. I made a pile of money selling parts and components online:
- One man’s trash is another man’s treasure. Like I said, they actually paid to have this stuff hauled off. Laser printers, laptops, desktop computers, industrial measuring equipment, all sorts of stuff. To them it was a pile of trash, to me it was a giant treasure chest waiting to be looted. A lot of it I was able to repair, but even broken stuff could be sold on eBay for a lot of money. This has taught me to always check if something has value before just throwing it out.
- Just because it is old doesn’t mean it is valuable. I got a lot of really interesting old stuff from the junk pile. For example, I found a few laptops that didn’t have hard drives. Instead, they had two floppy drives. You’d put the operating system in one floppy drive and your programs in the other. They were in pristine condition, but I was never able to find a buyer. Kind of reminds me of Pawn Stars when people bring in old stuff expecting a million dollars, only to find out the pawn shop isn’t even interested in giving them $10. Sometimes old junk is just that: old junk.
While on my mission, I got a resale certificate and signed up with a wholesale consumer electronics distributor. I made a little pocket money by selling to my fellow missionaries on our preparation day. My goal was to turn it into a full fledged business when I got home from my mission, but that didn’t work out:
- Online profit margins are thin. After taxes, office expenses, payment processing, shipping, seller fees on sites like eBay, and with piles of competition, profit margins are razor thin. It is unlikely that you’ll be able to make much money buying from a distribution catalog and selling online.
- Cash up front. I fulfilled an order from a missionary without getting paid first. He promised me he’d pay when it arrived. He never paid the full amount, so I ended up losing money on the deal. Still irks me a bit to think about it. I’ve learned to not even bother getting started on a sale or project until I’ve been paid.
When I got home from my mission, I started making webpages again. These would eventually become part of my current company, Corban Works, LLC. The majority of my income comes from advertising. I make sites that people want to visit, and advertisers pay me to show ads to my visitors. I run about 30 websites. I earn enough to pay my family’s bills and to put a little away for the future. Even though I applied all the lessons I learned in the past, my frequent mistakes have forced me to learn a few additional things:
- Know when to cut your losses. I’ve created and given up on a few dozen sites over the years. If something isn’t working, it may be time to cut your losses and move on.
- There is always room for a creative competitor. Just because there are a bunch of a certain type of business doesn’t mean there isn’t room for a new competitor, provided you bring something new to the table. Most of my high earning websites had stiff competition before I created them. By adding my own perspective or twist to the solution I was able to gain market share from my competitors.
- Be your own competitor. This doesn’t apply to all types of businesses, but for websites it is often wise to create a second website that competes with your first website that is already successful. For example, I created Fake Name Generator, then I created Identity Generator, a separate site that provides the same type of service but with a different look and feel. I frequently see both sites show up on the same “top name generator” lists and search results, and often see forum posts where people say they prefer one over the other. This has allowed me to get extra revenue out of a product that I’ve already heavily developed with just a little bit of extra effort.
- Diversify. A lot of people learned the hard way during the recent Google algorithm changes that having all your eggs in one basket is risky. It is also sometimes easier to start a new project than it is to try to squeeze a few more dollars out of an existing project.
- There is no easy money. You’ll spend more time (and money) chasing get rich quick schemes or the latest trend than you will by actually doing something. Anything. Even if it fails. The only way you’ll make money is if you stop reading and start doing.
Also shortly after getting home from my mission, I started buying and selling books with a mission buddy. We developed software that would allow us to scan books at library sales to determine their likely resale value, so we could quickly tear through a library sale to buy all the gems. We also looked into buying and selling remaindered books, although we ultimately decided against that due to the high cost of entry and high risk associated with it. I had a ton of fun during the short time that we worked on this business together, and learned a few things:
- Pay attention to your effective hourly wage. We had a lot of fun buying and selling books, but I don’t think we made a very high hourly wage doing it. When I eventually settle down somewhere I’ll definitely pick the hobby back up, but it will only ever be a hobby.
- Do your research. Joey and I toured a business that sold remaindered books in bulk. We looked over our options for pricing, transportation, and storage of the books. We visited a business that bought used books in bulk and sold them online. We checked out the competition for software that looks up book prices. We compiled lists of local book sales and attended a bunch of them. We did a ton of research, and this helped us avoid what would have been huge mistakes.
- Sometimes the timing just isn’t right. I still think it would be profitable to develop the software that scans book prices for resale (and encourage Joey to go for it if he has the interest), but the timing was wrong. Joey and I had too many projects going on, too many other interests taking our time, and we weren’t in a position (at least financially) to build this business in a way that would be successful long term.
I could probably triple this list, but I think I’ve already written enough for this post. I can’t emphasize enough how much these little ventures have impacted my life, the way I deal with those around me and the way I view work in general. I think these experiences made me who I am today, and I want to provide the opportunity for my daughter to have learning experiences like these as she grows up even if she ultimately decides she doesn’t want to be an entrepreneur.
Photo courtesy of 401(K) 2013 under the CC BY-SA 2.0 license.